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Student debt forgiveness to make big impact on loan eligibility

With Biden's plan to help relieve student loan debt, many people will be able to significantly raise their credit scores.

DES MOINES, Iowa — On Wednesday, President Joe Biden announced his student debt relief plan, which is set to help millions of borrowers across the nation. 

When borrowers look at their credit score, student loans make a huge impact. 

With Biden's plan to help relieve student loan debt for those making less than $125 thousand a year, many people will be able to significantly raise their credit scores, making them eligible for loans they may have been denied for in the past. 

"For those folks that are eligible and are going to qualify, then I think it's time for them to just take a step back and think, okay, what can I do with this little little break and how will I make big changes in my life," said Mike Hammen, a certified financial planner at Vision Financial Services.

Hammen said eliminating student debt will be extremely impactful for millions of people in many ways. 

"If you eliminate $10,000 of student loan debt, for a lot of cases, it makes people who may not have been eligible initially, perhaps are eligible now," Hammen said. "Or if they were eligible, it also impacts the rate, the lending rate." 

Future Drake University graduate Brian Orellana is celebrating Biden's news. 

"I'm really great, because that means I'm debt-free," Orellana said. 


He said finances are constantly on his mind as his family counts on his success.

"Being a first-generation student is really complicated because finances are a main priority for myself," Orellana said. "I have to think about that every day." 

According to EducationData.org, more than 433 thousand Iowans have student loan debt, with the average borrower having more than $30 thousand dollars worth of loans. That means a total of $13 billion of student loan debt belongs to Iowans. 

Hammen said people like Orellana are in a perfect position to take the funds they would have been spending on their student loans and invest in other necessities. 

"For those folks that have copies out for retirement plans, if you've been paying $200 to 250 per month of student loan debt, and you no longer have to pay it, then in fact, that can go towards a 401 K," Hammen said. 

Hammen believes the worst thing you can do is use the excess money you would have put toward your loans for trips and other material goods, as he said this help may never come again. 

While student debt forgiveness is a monumental step, some are hoping it means more change is on the horizon. 

"I would hope it makes [college] a little bit more accessible to people, makes it at least cheaper or at least not as foreboding to individuals to go to college or be afraid to go to college," said David Merchant, a student at Drake. 

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